Catholic Charities USA Webinar:

The Earned Income Tax Credit

Information and Outreach

Presenters

• Monica Maggiano, Director, Campaign to Reduce Poverty in America

• Jane Stenson, Senior Director for Human Services• John Wancheck, EIC Campaign Coordinator

Center on Budget and Policy Priorities • Amelia Dalton, Senior Tax Analyst, Internal

Revenue Service• Claudie Burchfield, Director of the Office of

Economic Opportunity in Murphy, North Carolina

Agenda

1. What is the Campaign to Reduce Poverty? Monica Maggiano

2. Introduction of EITC and Speakers Jane Stenson3. Money Talks! Have you heard? John Wancheck Claim the

Earned Income Credit 4. Questions and Answers5. IRS Amelia Dalton6. EITC outreach Claudie Burchfield7. Questions and Answers

What is the Campaign?

Goals• Cut poverty in the United States by 50 percent by

year 2020 • Call upon the government to better serve the poor

and improve public policies that strengthen and support families

• Educate policymakers and the public about the struggles of those living in poverty

• Engage those who are most impacted by government policies to be active participants in developing solutions to reducing poverty

• Partner with individuals, government, and organizations to address poverty in our country

What can I do? Endorse the Campaign and take action!

Main Issue Areas

• Health• Hunger• Housing • Family Economic Security

Catholic Charities USA supports tax policies that strengthen low-income families and individuals and address the needs of the poor and the vulnerable. This includes expanding the Earned Income Tax Credit (EITC), which is widely credited with lifting millions of families and individuals out of poverty every year.

Money Talks! Have you heard? Claim the Earned

Income Credit

John Wancheck

Money Talks! Have you Money Talks! Have you heard?heard?

Claim the Earned Income Claim the Earned Income Credit Credit

Presentation by:Presentation by: John Wancheck John WancheckOrganization:Organization: Center on Budget and Policy Priorities Center on Budget and Policy Priorities

Outreach Kit!Outreach Kit! www.cbpp.org/eic2008www.cbpp.org/eic2008 Phone:Phone: (202) 408-1080 (202) 408-1080

Email:Email: wancheck@cbpp.orgwancheck@cbpp.org

The Earned Income Credit (EIC)…The Earned Income Credit (EIC)…

Represents up to a 40% pay increase for Represents up to a 40% pay increase for some workerssome workers

Can turn an $8 per hour job into a $10 per Can turn an $8 per hour job into a $10 per hour jobhour job

In 2005, raised 4.1 million individuals — In 2005, raised 4.1 million individuals — including 2.2 million children — above the including 2.2 million children — above the poverty line poverty line

The EIC: Making a DifferenceThe EIC: Making a Difference

Helping working families out of poverty, 2007

Full-time Minimum Wage Job* (less

withholding)$10,805

Full-time Minimum Wage Job* (less

withholding)$10,805

Food Stamps$1,812

Food Stamps$1,812

EITC$2,853

Without EIC With EIC

Ann

ual I

ncom

e

Estimated Poverty Line for Family of

Two (including one child)$14,159

109%

89%

How Do Workers Benefit?How Do Workers Benefit?

Single parent, 2 children, earns Single parent, 2 children, earns $14,000 $14,000 Her EIC Her EIC = $4,716= $4,716

Single parent, 2 children, earns Single parent, 2 children, earns $18,000 $18,000 Her EIC Her EIC = $4,166= $4,166

Married workers, 2 children, earn Married workers, 2 children, earn $25,000 $25,000 Their EIC = $3,113Their EIC = $3,113

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000

Cre

dit A

mou

nt

The Federal Earned The Federal Earned Income Credit in Tax Income Credit in Tax

Year 2007Year 2007Maximum benefit

$4,716

Note: Married couples with income in the phaseout range qualify for a higher credit than single parents — shown by dashed lines.

Maximum benefit $2,853

Two or more childrenNo children One child

Maximum benefit $428

$40,000

EIC Benefits for Tax Year 2007 EIC Benefits for Tax Year 2007 at Various Income Levels at Various Income Levels

20072007household household

incomeincome

EIC for single EIC for single workers not workers not

raising a childraising a child

EIC for single EIC for single workers raising workers raising

one childone child

EIC for single EIC for single workers raising workers raising

two or more two or more childrenchildren

$ 5,000$ 5,000 $384$384 $1,709$1,709 $2,010$2,010

$ 8,000$ 8,000 $349$349 $2,729$2,729 $3,210$3,210

$10,000$10,000 $196$196 $2,853$2,853 $4,010$4,010

$12,000$12,000 $43$43 $2,853$2,853 $4,716$4,716

$14,000$14,000 $0$0 $2,853$2,853 $4,716$4,716

$16,000$16,000 $0$0 $2,751$2,751 $4,582$4,582

$20,000$20,000 $0$0 $2,112$2,112 $3,740$3,740

Note: This is not a tax table. Do not use this table to complete income tax returns.

How Much Can Workers Earn and How Much Can Workers Earn and Qualify for the EIC?Qualify for the EIC?

The average refund amount for families is $2,280.The average refund amount for families is $2,280. Income limits for married workers who file their taxes jointly are $2,000 Income limits for married workers who file their taxes jointly are $2,000

higher than these amounts.higher than these amounts. Investment income cannot exceed Investment income cannot exceed $2,900.$2,900.

Number of Number of children:children:

Income Income less than:less than:

EIC up to:EIC up to:

1 child1 child $33,241$33,241 $2,853$2,8532 or more 2 or more childrenchildren

$37,783$37,783 $4,716$4,716

No childrenNo children $12,590$12,590 $428$428

For tax year 2007:

Definition of a Definition of a “Qualifying Child”“Qualifying Child”

EICEIC

RelationsRelationshiphip

Son, daughter Son, daughter Stepchild, adopted child, grandchild Stepchild, adopted child, grandchild Brother, sister, stepbrother, stepsister (or Brother, sister, stepbrother, stepsister (or their descendents) their descendents) Foster childFoster child placed by a government or placed by a government or private agencyprivate agency

ResidencResidencee

Must live with worker in the U.S. for more Must live with worker in the U.S. for more than half the year than half the year

AgeAgeUnder 19, or under 24 if full-time student, Under 19, or under 24 if full-time student, or any age if totally and permanently or any age if totally and permanently disableddisabled

Why is outreach needed?Why is outreach needed?

1.1. As many as 15-20% of eligible workers As many as 15-20% of eligible workers don't claim the EICdon't claim the EIC

2.2. 70% of workers who claim the EIC pay 70% of workers who claim the EIC pay commercial fees to file returns — can commercial fees to file returns — can amount to over $300 or more in fees, amount to over $300 or more in fees, draining about $1.4 billion out of EIC draining about $1.4 billion out of EIC refunds nationwiderefunds nationwide

Includes the “unbanked”Includes the “unbanked”

Who’s Missing Out?Who’s Missing Out?

Workers at risk of missing out on the EIC include:Workers at risk of missing out on the EIC include: Parents just entering the labor force; self-employedParents just entering the labor force; self-employed New parents — incl. foster and adoptive, kinship careNew parents — incl. foster and adoptive, kinship care Divorced or separated parentsDivorced or separated parents Homeless workers; dislocated workersHomeless workers; dislocated workers Workers not raising qualifying childrenWorkers not raising qualifying children Parents with older disabled children Parents with older disabled children Workers who speak English as a second language Workers who speak English as a second language Workers not otherwise required to file a tax returnWorkers not otherwise required to file a tax return

For Tax Year 2007:For Tax Year 2007:

$8,750 - single $8,750 - single

$11,250 – head of household $11,250 – head of household

$17,500 - married$17,500 - married

Volunteer Income Tax Assistance (VITA)Volunteer Income Tax Assistance (VITA)

Provides free tax filing help for low-income Provides free tax filing help for low-income workers at community sites.workers at community sites.

o Sponsored by the IRSSponsored by the IRS

o In many communities across the country In many communities across the country

o Refunds deposited in 7-12 days through e-filingRefunds deposited in 7-12 days through e-filing Sites can help open bank accountsSites can help open bank accounts

Alternative to costly commercial tax preparation Alternative to costly commercial tax preparation fees and Refund Anticipation Loans (RALs)fees and Refund Anticipation Loans (RALs)

EIC Outreach CoalitionsEIC Outreach Coalitions

Choose strategy, themes and Choose strategy, themes and materials for tax season outreach materials for tax season outreach campaignscampaigns

Find partners to host Volunteer Find partners to host Volunteer Income Tax Assistance (VITA) sites Income Tax Assistance (VITA) sites

Recruit VITA volunteers as Recruit VITA volunteers as preparerspreparers

Organize training for volunteersOrganize training for volunteers Get information out to workers!Get information out to workers!

The Value of More PartnersThe Value of More Partners

Outreach coalitions divide campaign Outreach coalitions divide campaign tasks; takes advantage of partners’ tasks; takes advantage of partners’ special capabilities and avoids special capabilities and avoids duplicationduplication

Some partners are experienced Some partners are experienced reaching some parts of the reaching some parts of the community: community: Ex. -- ethnic communities and Ex. -- ethnic communities and businesses, family day care providers, businesses, family day care providers, people with disabilitiespeople with disabilities

Making ConnectionsMaking Connections

Finding an Outreach CoalitionFinding an Outreach Coalition www.cbpp.org/eitc-partnership/directory.htmwww.cbpp.org/eitc-partnership/directory.htm Coalitions will have lists of VITA sites, flyers, etc.Coalitions will have lists of VITA sites, flyers, etc.

Finding VITA sites for referralFinding VITA sites for referral Individuals:Individuals: Call IRS 1-800-829- Call IRS 1-800-829-

1040 (voice-mail option #1, then #5, 1040 (voice-mail option #1, then #5, gets you to an operator who has gets you to an operator who has sites by zipcode). sites by zipcode).

GroupsGroups: call the IRS Territory : call the IRS Territory Manager for a list Manager for a list

www.cbpp.org/eic2007/territorymanager2007.pdfwww.cbpp.org/eic2007/territorymanager2007.pdf

EIC Impact in the EIC Impact in the CommunityCommunity

Caddo Parish, LACaddo Parish, LA 32% of all tax filers claimed EIC for 2004, bringing in 32% of all tax filers claimed EIC for 2004, bringing in

nearly $74 million, plus over $17 million through the nearly $74 million, plus over $17 million through the Child Tax Credit Child Tax Credit

If 20% of those eligible didn’t claim the EIC, nearly If 20% of those eligible didn’t claim the EIC, nearly $10 million from the EIC may have been left in $10 million from the EIC may have been left in Washington instead of benefiting Caddo Parish.Washington instead of benefiting Caddo Parish.

Tax Preparation Fees and LoansTax Preparation Fees and Loans 78% of Caddo Parish EIC filers used commercial 78% of Caddo Parish EIC filers used commercial

preparers – higher than national rate. preparers – higher than national rate.

About half of EIC filers also used expensive RALs.About half of EIC filers also used expensive RALs.

Local EIC Claims DataLocal EIC Claims Data

Brookings Institution interactive Brookings Institution interactive website website www.brookings.edu/metro/EITC/EITC-www.brookings.edu/metro/EITC/EITC-Homepage.aspxHomepage.aspx

Zip Code-level dataZip Code-level data

Statistics on EITC, CTC, RALs, Statistics on EITC, CTC, RALs, income levels of filers…..& much income levels of filers…..& much more…..more…..

Do the EIC/CTC Affect Other Public Do the EIC/CTC Affect Other Public Benefits?Benefits? EIC: EIC: notnot income for specified federal programs including: income for specified federal programs including:

Food stampsFood stamps MedicaidMedicaid SSISSI Veteran’s benefitsVeteran’s benefits Public housingPublic housing Head StartHead Start

States generally don’t count EIC for TANF or SCHIP. States generally don’t count EIC for TANF or SCHIP. Some count it for child care and energy assistance.Some count it for child care and energy assistance.

CTC:CTC:Not income for any federal, state or local program Not income for any federal, state or local program financed financed even in parteven in part with federal funds with federal funds

Resource rulesResource rules

Programs have different rules about how long Programs have different rules about how long the EIC or CTC refund can be the EIC or CTC refund can be savedsaved before it before it counts against program resource limits.counts against program resource limits.

All programs exclude EIC/CTC as a resource All programs exclude EIC/CTC as a resource for at least one month after the month the for at least one month after the month the refund is received.refund is received.

Food stamps – not counted for 12 monthsFood stamps – not counted for 12 months SSI — not counted for 9 months SSI — not counted for 9 months IDAs are a “safe harbor.”IDAs are a “safe harbor.”

Advance EIC: Get the Most out of Advance EIC: Get the Most out of Every PaycheckEvery Paycheck

Some workers raising children Some workers raising children can get the Advance EIC in their can get the Advance EIC in their paycheck and get a year-end paycheck and get a year-end refund too! refund too!

Increase take-home pay up to Increase take-home pay up to $130 p/month.$130 p/month.

Workers must file IRS Form W-5 Workers must file IRS Form W-5 with their employer to start with their employer to start Advance EIC payments.Advance EIC payments.

Additional Tax CreditsAdditional Tax Credits

Child Tax Credit (CTC)Child Tax Credit (CTC) The CTC is worth The CTC is worth up toup to $1,000 for each qualifying $1,000 for each qualifying

child child under age 17under age 17 Workers who earned Workers who earned more thanmore than $11,750 $11,750 in 2007 can in 2007 can

get a CTC refundget a CTC refund

Child and Dependent Care Credit (DCTC)Child and Dependent Care Credit (DCTC) Federal tax credit for expenses to care for a young Federal tax credit for expenses to care for a young

child, or a dependent with disabilities, in order to child, or a dependent with disabilities, in order to work. Credit only reduces income tax.work. Credit only reduces income tax.

Maximum expenses:Maximum expenses: $3,000 for one dependent, $6,000 for two or more$3,000 for one dependent, $6,000 for two or more

How Do Workers Benefit?How Do Workers Benefit?

Single parent, 2 children, earns Single parent, 2 children, earns $14,000 $14,000 Her EIC $4,716 + Her EIC $4,716 + CTC CTC $338 = 5,054$338 = 5,054

Single parent, 2 children, earns Single parent, 2 children, earns $18,000 $18,000 Her EIC = $4,166 + Her EIC = $4,166 + CTC CTC $938 = 5,104$938 = 5,104

Married workers, 2 children, earn Married workers, 2 children, earn $25,000 $25,000 Their EIC = $3,113Their EIC = $3,113 + + CTC $2,000CTC $2,000 = $5,113 = $5,113

IRS- EITC

Amelia Dalton Senior Tax Analyst, Internal

Revenue Service

Spotlight on an Agency

Link between Financial Literacy and EITC

Claudie BurchfieldDirector of the Office of Economic

Opportunity in Murphy, North Carolina

Questions and Answers

Amelia.Dalton@irs.gov

1-404-338-8945

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